PLR 201017032: Taxpayer granted more time to elect Canadian RRSP tax deferral

Plain-English summary

The IRS granted a Canadian citizen who became a U.S. resident 60 days to elect treaty-based deferral of U.S. taxation on income accruing in a Canadian Registered Retirement Savings Plan. The taxpayer had not known about the election requirement and learned of it when a current tax preparer prepared the taxpayer's joint return. The IRS found that the taxpayer met the standards for relief under the extension-of-time regulations and required Form 8891 filings for 2004 and later tax years through the year of final distribution.

Ruling snapshot

• Question: Can a U.S. resident receive more time to elect treaty-based tax deferral for a Canadian RRSP?
• Outcome: approved
• Key authorities: U.S.-Canada Income Tax Treaty, Article XVIII(7); Rev. Proc. 2002-23; Treas. Reg. § 301.9100-3

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Washington, DC 20224

Number: 201017032
Third Party Communication: None
Release Date: 4/30/2010
Date of Communication: Not Applicable
Index Number: 9100.22-00, 9114.03-06
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:INTL
PLR-142543-09
Date:
January 22, 2010

A = ----------------------
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Tax Years = ---------------

Year 1 = -------

Year 2 = -------

Dear-----------------:

This is in reply to a letter dated September 18, 2009, requesting an extension of time under Treas. Reg. § 301.9100-3 for A to elect the provisions of Rev. Proc. 2002-23, 2002-1 C.B. 744, for Tax Years. The information submitted for consideration is substantially as set forth below.

The ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party. This office has not verified any of the material submitted in support of the request for a ruling. Verification of the factual information, representations, and other data may be required as a part of the audit process.

A is a Canadian citizen who established a Canadian Registered Retirement Savings Plan (RRSP) in Year 1. A became a U.S. resident in Year 2. A and her husband file a joint income tax return. A was not aware, nor was she ever advised by her previous tax advisor, that she had to make an election, under paragraph 7 of Article XVIII of the U.S.- Canada Income Tax Treaty, to defer U.S. taxation of income accruing in her RRSP or to file Form 8891 for her RRSP, until their current tax preparer started to prepare A’s and her husband’s joint return for 2008.
PLR-142543-09
2

A states that the Internal Revenue Service has not communicated with her in any way regarding her RRSP.

Treas. Reg. § 301.9100-1(c) provides that the Commissioner has discretion to grant a taxpayer a reasonable extension of time, under the rules set forth in Treas. Reg. § 301.9100-3, to make a regulatory election under all subtitles of the Internal Revenue Code, except subtitles E, G, H, and I.

Treas. Reg. § 301.9100 -1(b) provides that an election includes an application for relief in respect of tax, and defines a regulatory election as an election whose due date is prescribed by a regulation, a revenue ruling, revenue procedure, notice, or announcement.

Treas. Reg. § 301.9100-3(a) provides that requests for relief subject to this section will be granted when the taxpayer provides the evidence (including affidavits described in Treas. Reg. § 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government.

In the present situation, the election provided in Rev. Proc. 2002-23 is a regulatory election within the meaning of Treas. Reg. § 301.9100-1(b). Therefore, the Commissioner has discretionary authority under Treas. Reg. § 301.9100–1(c) to grant A an extension of time, provided that A satisfies the standards set forth in Treas. Reg. § 301.9100-3(a).

Based on the facts and circumstances of this case, we conclude that A satisfies the standards of Treas. Reg. § 301.9100-3. Accordingly, A is granted an extension of time until 60 days from the date of this ruling letter to elect the provisions of Rev. Proc. 2002- 23 for Tax Years.

Pursuant to section 4.07 of Rev. Proc. 2002-23, the election once made cannot be revoked except with the consent of the Commissioner. For 2004 and all subsequent tax years until the tax year in which a final distribution is made from the RRSP, A must file a Form 8891 for the RRSP for which the election is made.

As provided in Treas. Reg. § 301.9100-1(a), the granting of an extension of time is not a determination that A is otherwise eligible to make the above-described election.

No ruling has been requested, and none is expressed, as to the application of any other section of the Code or regulations to the facts presented.

A copy of this ruling letter should be associated with A’s and her husband’s amended tax returns for Tax Years.
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3

This ruling is directed only to the taxpayer who has requested it. I.R.C. § 6110(k)(3) provides that it may not be used or cited as precedent.

Sincerely,

___
M. Grace Fleeman
Senior Technical Reviewer
CC:INTL:Br1

Enclosure:
Copy for 6110 purposes